A Radial Point Interpolation Method for Pricing Options on a Dividend Paying Asset

Pricing European and American options by radial basis point interpolation

We propose the use of the meshfree radial basis point interpolation (RBPI) to solve the Black–Scholes model for European and American options. The RBPI meshfree method offers several advantages over the more conventional radial basis function approximation, nevertheless it has never been applied to option pricing, at least to the very best of our knowledge. In this paper the RBPI is combined wi...

American Options on Dividend-Paying Assets

We provide a comprehensive treatement of option pricing with particular emphasis on the valuation of American options on dividend-paying assets. We begin by reviewing valuation principles for European contingent claims in a financial market in which the underlying asset price follows an Itô process and the interest rate is stochastic. Then this analysis is extended to the valuation of American ...

Radial Basis Function Methods for Pricing Multi-Asset Options

The price of an option can under some assumptions be determined by the solution of the Black–Scholes partial differential equation. Often options are issued on more than one asset. In this case it turns out that the option price is governed by the multi-dimensional version of the Black–Scholes equation. Options issued on a large number of underlying assets, such as index options, are of particu...

A Radial Basis Function Method for Solving Options Pricing Model

This paper applies the global radial basis functions as a spatial collocation scheme for solving the Options Pricing model. Diierent numerical time integration schemes are employed for the time derivative of the model. In the case of the European options, it is shown that the major numerical error is from the time integration instead of the spatial approximation by comparing with the analytical...

A Quasi-radial Basis Functions Method for American Options Pricing